It is ironic that even after 13 years of the law being in force, one needs to refer to legal provisions to decide whether a particular service is taxable under the Finance Act, 1994 as service tax or not. While the marquee services are not spared, there is confusion with respect to the one-off and slightly low-key services.
While it is not to be disputed that the law has come a long way since it was conceptualised, one would not be asking for too much if one expects more clarity in the law.
Is it a service?
The CESTAT (Customs, Excise and Service Tax Appellate Tribunal) Bangalore in CCE, Bangalore vs Denso Corporation 2007 TIOL-1324- CESTAT, Bangalore, ruled that transfer of technology is not taxable under the head consulting engineer. The same Tribunal, in CCE & ST, Bangalore vs Siddharath Polymers 2007-TIOL-1366-CESTAT, Bangalore, ruled that a consignment agent is not a clearing and forwarding agent. Another decision of the same appellate authority, Karakkattu Communications vs CCE, Cochin 2007-TIOL-1374-CESTAT, Bangalore clarified that sale of SIM cards are not exigible to service tax.
The CESTAT Mumbai had a larger issue on hand to decide whether the Institute of Banking Personnel Selection is a commercial concern. In Institute Of Banking Personnel Selection vs CST, Mumbai 2007-TIOL-1393-CESTAT, Mumbai, the Tribunal ruled that the Institute is not a commercial concern. The dictionary meaning of commercial concern defined as having financial gain as an object and having profit as a primary aim rather than artistic value and the same Tribunals ruling that BCCI is not a commercial concern (BCCI vs CCE 2007-TIOL-684-CESTAT Mumbai) were helpful in this decision.
Nature of service
To add a bit of humour to the spate of case laws, the Bangalore Tribunal held that repairing of wigs does not amount to beauty treatment and, hence, cannot be costlier by 12.36 per cent (CCE, Mangalore vs Beau Mondes Clinic 2007-TIOL-1521-CESTAT Bangalore).
From the Prasanna Travels Pvt Ltd vs CCE & ST, Pune (2007-TIOL-1519-CESTAT, Mumbai) ruling, travel agencies that provide stage carriers came to know that they need not charge service tax for provision of stage carriers. Customs house agents cannot be brought under port services was the decision of the Ahmedabad Tribunal in Velji P & Sons (Agencies) Pvt Ltd vs CCE, Bhavnagar (2007-TIOL-1452-CESTAT, Ahmedabad).
In Kusalava Finance Ltd vs CC & CE, Guntur (2007-TIOL-1010-CESTAT, Bangalore), it was held that financing the purchase of automobiles is neither hire purchase service, banking or other financial services. It becomes very clear that one cannot look into the broad activity and decide whether it is a service or not without going into the nitty-gritty of the service rendered.
As if the mushrooming case laws are not enough, we now have Notification No 40/2007 which exempts port and allied services in connection with export from the whole of the service tax leviable. The concept of exemption seems to be different under service tax laws, what with the need to pay the service tax and then knock at the doors of the excise authorities for a refund armed with documentary evidence of both export as well as the payment of service tax.
The sympathetic eye being shown towards exporters appears to be with an intent to enable them ride over the rise in the value of the rupee. In what appears to be a coincidence, the Export of Service Rules also provide for a similar methodology to claim the exemption, with the difference being that the Export of Service Rules needed some terms and conditions to be fulfilled while Notification 40 seems to be an omnibus exemption endowing the taxpayer with the exemption if the twin duties of exporting service and paying the tax thereon are complied with.
Just as the cricket fever lasts only till the season is on, it appears that the limelight on service tax provisions lasts for only a few months, that is, from the Budget till the Finance Act is adopted. All the activity that happens between the adoption and the next Budget are shrugged off as inevitable. One hopes it is a matter of time before this trend is reversed and simplified provisions are legislated.
Mohan R. Lavi (The author is a Hyderabad-based chartered accountant.)